According to the Organisation for Economic Co-operation and Development (OECD), the global economy will shrink by 4.2% in 2020. This would represent the deepest recession since the Second World War.
Governments responded robustly. Between January and December 2020, they announced fiscal support worth US$19.6 trillion, equal to 22% of global GDP. For comparison, only 2% of global GDP was deployed during the global financial crisis in 2008.
The fiscal support map
Despite the promise of vaccine rollouts, the continued economic uncertainty driven by further lockdowns means the global economy is still estimated to be 5% smaller at the end of 2021 than if the economy continued to grow at pre-pandemic forecasts. This represents a gap larger than the size of the German economy.
Given this outlook, Accenture Strategy has calculated that US$7 to US$9 trillion in additional fiscal support would still be needed in 2021 to close projected shortfalls in aggregate demand and return global GDP growth to its pre-pandemic level. The level of required support could rise even further if repeated waves of the virus lead to additional economic headwinds, or if traditional recession fallouts such as unemployment or bankruptcies sustain.
Businesses may instinctively, and understandably, react to additional waves of the virus by focusing on immediate relief efforts. However, businesses should also keep the long game in sight, realizing the transformative power of Recovery Investment to drive longer-term, sustainable growth.
Recovery Investment is next
This crisis has seen fiscal support come in three forms: Relief, Stimulus, and Recovery Investment. To date, just 16% of announced support has been earmarked for Recovery Investment. Most of the fiscal support has been directed to the Stimulus phase as many governments have introduced restrictions to suppress the virus.
For many countries, unlocking Recovery Investment depends on the success of vaccine rollouts as economies open and consumer confidence rebounds. Recovery Investment presents an opportunity for businesses to propel society into a more resilient and sustainable future. Leaders that understand the potential multiplier effects will be well positioned to capture the gains.
Three types of fiscal support
Seize the opportunity and fuel change
It has become clear that returning to business as usual is neither likely nor desirable. There is no going back.
If leveraged effectively, Recovery Investment could be the fuel not only to rebuild society, but also to accelerate reshaped value chains and new industry dynamics. This is a once-in-a-lifetime, multi-trillion-dollar opportunity for businesses to leverage recovery funding to fundamentally leapfrog the economy, society, and the environment for the betterment of all.
When deployed with intention, Recovery Investment can result in widespread impact across three key parameters: Economic, environmental and human
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Positioning for long-term growth
Now is the time for business leaders to explore the art of the possible and to realize the full potential of activating Recovery Investment. Fiscal support is not a zero-sum game between governments and businesses. On the contrary, if business leaders lean into the process with a cooperative mindset, transformational value can be created for businesses and society alike.
A coming wave of Recovery Investment creates an unprecedented opportunity for leaders to accelerate transformations that will contribute to a more sustainable, prosperous future with technology at the core.
In doing so, it is essential that business leaders have the appropriate strategies in place to maximize the use of Recovery Investment. Those who lead with responsible business, underpinned by exponential technology change, will be well positioned to leverage this multi-trillion-dollar opportunity to rapidly advance goals for society and businesses alike.